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tv   Bloomberg Markets  Bloomberg  June 30, 2016 12:00pm-2:01pm EDT

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scarlet: i am scarlet fu. welcome to bloomberg markets it we have breaking news -- the ecb is said to weigh looser qe rules according to euro area officials discussion -- familiar with the discussions. the european central bank considering loosening rules for bond purchases to ensure enough debt is available to buy in the aftermath of the vote from last week. policymakers are concerned that the securities eligible have shrunk according to people familiar with the discussion. at governing counseling members favored changing allocation of bond purchases away from the size of the nation's economy to one more in line with the size of the debt, and if you look at the impact with the euro-dollar, this is an intraday chart. right now it is plunging. taking a leg off. session lows here for euro-dollar.
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matt: yeah, i am actually going to try to pull off bunds, as i suspect you will see an impact. not as much of an impact, but it could be that we are currently finished with trading. right now, obviously, 5:00 here in london, 6:00 on the continent -- they do not open until 8:00 p.m. it looks like they have finished trading for now. for the day, a drop to negative 0.145. oliver: we can -- scarlet: we can track the yield on the 10-year. it is at session lows, dipping to 1.4612 percent. we are at session lows. however, you are looking at the s&p. oliver: the s&p got a little bit
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of a pop in the last 10 minutes. we are at a bit of a rally this morning, but you can see this kind of pop. this will potentially bring more loose money into the equation. we have seen that with fed funds going to zero following brexit. we're back to the situation where, guess what, maybe this is in a perverse way good for equity markets and good for people that want to see continued accommodation from central banks around the world, even as they go further along the spectrum in terms of risk-taking. scarlet: another leg up for the s&p 500. let's check in with julie hyman who is looking at the pound and the trade fair. the pound move a carney begins speaking. julie: mark carney talking about essentially more stimulus happening the u.k.. that drove the pound down, which is what you might expect. down by 1.4%. also, if i can bring you into the bloomberg, i just called up, while we were talking about these ecb headlines -- looking
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at the pound-euro. there, too, we saw the sharp leg lower, but now taking a little bit of a leg up. still negative on the day. a little bit of a leg up in the wake of the ease -- these ecb headlines crossing on the potential broadening of quantitative easing. let's look at the major averages. as you heard scarlet and oliver saying, we are pretty much at the highs of the session on more money flowing into the system here. also, because it is the last day of the quarter, i want to take a look at what we have seen here with the dow up about .9%. the s&p up a little more than 1%. the nasdaq trailing, as it has been, all year. also looking at the dollar looking at what we have seen in the second quarter for the u.s. currency -- a little bit of a rebound, 3%. the chart gives you a look at how volatile it has been over the course of the quarter. it is not a matter of, you know,
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straight up here, by any means, the u.k. vote rocking the action over the past couple of weeks. finally 10-year -- the 10-year yield has fallen sharply over the past three months, but really, much of the decline happening in the wake of the u.k. vote. oliver: we talked about mna yesterday -- how is that progressing -- more deal activity? julie: yes, there has been, or perhaps some. monfils might bid for her she's. -- hershey. there are some questions about this deal. the hershey trust controls that company. so, questions about whether they would approve it, with the process would be like, and the other deal, the $4.3 billion acquisition of starz by lions gate entertainment. lions gate earlier was lower.
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it has moved higher. starz up 9.5%. matt: all right, i am going to go ahead and recap the news that we have here. after we got finished listening to bank of england governor mark carney talking about the fact that he is probably going to have to loosen policy within the next couple of months to deal with the fallout of the brexit vote, we see the ecb is saying it will also way looser qe roles as brexit depletes the asset pool from which they can buy. i want to bring in lucy meakin who covers all things central banks. you just came back from the bank of england. you have been monitoring. you are watching and mark carney speak the entire time. our mark carney and the ecb on the same page? lucy: can you say that again? matt: are mark carney and the ecb on the same page? lucy: i think so.
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they need to show they are reacting to what is interesting about carney's press conference is a new bank of england way. during the previous crisis, we have not seen anything like this. we have had carney speak to the public live on tv twice in the last week. that is completely unheard of. he is trying to be proactive and get ahead. matt: what are we hearing about actual steps the boe is ready to take right now? lucy: they said they would give the banks as much liquidity as they would need, and have started doing that with extra liquidity auctions, a pledge on the morning of the results within minutes of cameron resigning. matt: 250 billion pounds, right? lucy: all kinds of liquidity is available, and all other options are available -- rate cuts, qe different types of stimulus, but august is really the date when we're going to find out, i think. matt: what are the specific
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concerns mark carney has right now other than the obvious medical uncertainty? is it simply the gyrations we have seen, the huge volatility we have seen over the past five trading days. lucy: the pace and the pound has to be a concern, but not necessarily at a week pound could be positive for the u.k. but the pace of the drop -- that kind of omentum is quite scary. the fluctuation in the stock market, that has been immense as well. on carney's speech, we have gone to the highest since august, so -- matt: what you make of the ecb saying there is a shrinking pool of eligible that. help us understand that in layman's terms. there are just not enough bonds out there for the ecb to buy? lucy: basically said -- they said they would only by certain types of debt, certain amount. what they are saying now is actually maybe there isn't enough debt, although i believe
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it is anonymously sourced, so i do not know entirely where it is coming from, because they have been really desperate in the past to make sure people don't think there is a scarcity issue. matt: right. this is according to euro-area officials familiar with discussions. they are same within the boundaries they have set for themselves there is not enough debt to buy, and -- lucy: they will need to loosen boundaries up. matt: exactly. something that those who are long-risk assets are happy about. oliver: let's bring in markus schomer. he is listed among the top forecasters of the u.s. economy. who better to be here as we talk about the impact of this breaking news on markets around the world? what you make of this news that potentially the bank of england could be dipping into more --
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scarlet: european central bank. oliver: right, ecb. scarlet: both, really, right? mr. schomer: you see how well have prepared central banks are. this is very different from previous crises. it is something central banks -- markets should be happy about. central bank's are stepping up to reassure investors they are there to stand behind falling equity markets. i think what the bank of england is doing, obviously looking at its own economy. with the ecb is doing is a much more preventative move against rising yield spreads in countries like portugal, greece spain -- countries that would be at risk if there is a wobble in confidence about the european union or the eurozone. i think this comment about expanding the pool is not so much designed to deal with a shortage of bonds, but designed to potentially skew the purchases toward portuguese, spanish, or greek bond yields. in fact, don't even by greek
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bond yields right now. maybe this is the first to include greek bonds, and that would be positive. scarlet: they would be winners, but is this a case of too much sovereign european debt having negative interest rates and they cannot by german debt? mr. schomer: part of that is true, but it also makes no sense to buy more german debt. even in the run-up to brexit you can see bond spreads widening between german portuguese, and spanish bonds. that is something ecb should be worried about. they try to run monetary policy for all the eurozone members but if financing conditions deteriorate in some parts of the eurozone, that is something that eurozone needs to move -- work against. i think a more skewed purchasing system would help, and maybe that is axing with the ecb is trying to communicate, rather than the fact there are not enough bonds anymore. oliver: with central banks last
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week, thursday, friday, saying we will be here to provide a backstop, and now we have this news, but is that too fast -- should we interpret this as a potential sign things could get rocky as a result of brexit? it seems markets are shrugging it off. is this telling us we should we think the impact? mr. schomer: we should look at it as as reassuring as it sounds. financial markets are taken at the right way. if you look at equity market reaction, you do not see it blip of brexit in the longer term s&p 500 chart. last year's you on it -- you want devaluation had a much bigger impact than brexit so far. i think it is achieving the right outcome central banks are targeting. the one central bank we have not heard from is the side. that is interesting. with talk about the ecb, the bank of england. we have not heard from the fed yet. scarlet: should the fed be making reassurances as well?
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mr. schomer: i am not sure if we need reassurances, but i'm looking forward to the speeches to see what brexit does to their forecast for rate hikes. don't forget, two weeks ago, we got the last set of projections and the fed is still looking at two rate hikes. scarlet: the market feels otherwise. mr. schomer: the market feels otherwise. we to hear from the fed, and that will be another reason for equity markets to cheer. matt: german debt does not necessarily help a company that country that needs it, right? i'm in, they have extremely low interest rates, already had stellar growth in the last quarter. what if the ecb -- or is it possible for the ecb to go and buy greek debt, which it has not been able to do thus far, and that is one country that obviously, would benefit the most. mr. schomer: that is what the
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statement could mean. they have not been explicit to say they wouldn't loot greek sovereign bonds, -- included greek sovereign bonds, but if you were to see an increase in the body of, a widening of the spread, i think a move in that direction would be good. i think it would have been wise for the ecb to include greece anyway but i think this statement could be the first step toward such a move, yeah. matt: do you think we're going to see -- that also makes me think the ecb will play a part in a deeper union, which are a lot of people have said is necessary to make the eu truly work, or at least the eurozone. do you agree? mr. schomer: well, i think the ecb is already playing a major role in that spirit we have the union on the monetary policy side right? the problem is we do not have a fiscal unit. that is the reason we still have these large differences in bond yields. if we had a closer fiscal union, the bond yield differentials
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would more or less disappear, if we had, for keppel, a proper eurozone bond issuance that would cover fiscal spending of all member states. that is something that i think we are still years away from. i am not sure it would get sped up by a brexit, though having said that, the u.k. was one of the main members of the european union pushing against deeper integration. if the u.k. now leaves those discussions, i think the rest of the eu countries will find it much easier to move along the ever closer union centrally enshrined in the treaties. scarlet: i want -- oliver: i want to finish i looking forward, and they are more likely to price in a cut by the fed as opposed to a hike -- you mentioned earlier that these reassurances by the central banks will do their job, but is the result of that job going to be good, or do we get concerned about asset inflation in a free markets and these types of
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things where you see investors get bullish as a result of more accommodation? mr. schomer: oh, i think we are far away from having a problem with asset price inflation. equity markets have been week all year in an environment where growth is somewhat uncertain. we are now moving into a slightly different phase of the u.s. short-term business cycle with growth expectations for q2 for example, quite bullish, and the next question is is the strong growth rates sustainable into the summer into q3? that is the question important for equity markets, not so much what the fed is doing or brexit is doing but the growth rate -- is that seen as sustainable, a refreshing of the growth rate in the u.s., or will q2 be the exception? q4 and q1 is that really where we are question mark oliver: --we are?
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oliver: markus schomer, great to have you on. met, we still have more coming up. matt: we will continue to talk about the massive news from credit markets, but you was the equity markets commodities, currency markets reacting as well. the ecb thinking about loosening the rules that pertain to what kinds of debt it can buy because the eligible pool has shrunken post-brexit. when we come back, we will hear from barclays ceo just daily speaking to erik schatzker saying the you -- the u.k. banking industry is still in strong shape. this is bloomberg. ♪
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oliver: live from -- matt: live from london, i am
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matt miller with oliver renick and scarlet fu in new york. chairman of the biggest banks are defending london as the brexit vote went $45 billion from the nation's largest. one of them is barclays ceo just a. he spoke with erik schatzker earlier today in london. eric asked if barclays could withstand the slowdown the bank of england is now forecasting. mr. staley: i think the crisis we are facing right now is a political crisis. it clearly will have economic consequences but right now we have a political crisis that may need -- lead to economic challenges facing a banking industry that, actually, is in very strong ship, particularly in the u.k.. the strategy we have for barclays as a transatlantic consumer, corporate, and investment bank, is to be large and diversified, so that when we face a challenge in a given
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market or sector, we have the diversification to be resilient. you know, we have an investment bank where over 60% off -- of our revenues are driven by new york and a u.s.-dollar-based care we have a good credit card business where 50% of the business is here in the u.k. and 50% is between germany and the u.s.. we will be a part of responding to what happened to the economic environment inside the u.k.. we are a very major player in this country. it is our home country can we are a british bank. so, as the economic response to the political crisis unfolds just like governor carney was talking about, the bank of england will take corrective actions to try to ease the economic response, and barclays, obviously, will be very thomas of what is going on in the
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economy and adjust to what we do. the important thing is for barclays to be there for the public of great britain, to be there for our consumer clients small-business clients, and our corporate clients with credit advice, and services. we have thought a lot about this referendum. it obviously went one way that will have economic consequences, but barclays is going into the process with eyes wide open, its balance sheet exceptionally strong, and its people very motivated and committed to the economy of the united kingdom. erik: so i take it the answer is yes, you can, withstand the challenges ahead of you. mr. staley: for sure. erik: your leadership skills will be tested like never before, perhaps. are you ready? mr. staley: we will find out. we have spent 13 months getting ready for this referendum vote. we created a situation room. we had the full executive committee meeting about four times a day beginning thursday,
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and obviously through the early part of this week. erik: four times a day? mr. staley: oh, yes, to make sure we all know is going on -- what was happening in our branches, our call centers. on friday alone we made 1500 loans to small businesses across the united kingdom. to know what was going on in the foreign exchange markets -- in the early hours of friday, we had three times the foreign exchange trading through our systems in the first few hours that we normally have in a full day. to know what corporate clients were asking, institutional clients -- we were prepared, and i feel terrific about the way the bank handled itself. the other thing that is quite different from what we have seen in previous crisis, coordination between large banks and regulators. we were on the phone actively with the bank of england, the fca, the new york fed, etc. there is a recognition that, you know, to avoid the next financial crisis, banks and
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regulators have to be collaborative. i think through this referendum vote that shown its colors. erik: what kinds of assumptions are you making right now about the future? it is hard obviously. the governor of the bank of england and everyone else is talking about uncertainty -- uncertainty, almost by definition, means you cannot predict the future, but you have to have some assumptions. what you think is going to happen to the u.k. economy? what do you think is going to happen to london as a financial center? mr. staley: the senses we will have uncertainty for a good period of time to we have to find a new prime minister in the u.k.. we have to deal with what is called the article 50 trigger, which begins this two-year clock. there will be political uncertainty, and it leads to economic uncertainty and a slowdown in investing. erik: people put off decisions. mr. staley: people put off decisions to invest from major
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corporations to people wanting to buy an apartment. the economic situation is much harder than it was last week. when we think about credit, we want to provide credit to the consumers and corporates of the u.k., but it is not good for anybody if the credit becomes impaired. it is not good for the borrower, not good for the lender. we will look at the standards, what we are expecting for the future economic outlook to manage our balance sheet and are credit kerley want to be supportive of the u.k. economy but also prudent. vis-a-vis the bank overall against the regulatory environment and what may happen with the european union, it is going to take a long time to get clarity as to what the rules of the road will be. but we like the position we've got. we love being a transatlantic bank with an anchor in london and new york, the two financial centers of the world. we love being both a retail bank
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and a wholesale bank. we think we have the assets to adjust to whatever may come our way as the european union and the u.k. negotiate the next phase. erik: what is going to be the hardest part of managing through this crisis? mr. staley: you know, i think uncertainty is a challenge. that will be a challenge for us. erik: more practically. mr. staley: more practically our stock price trades at a significant discount to book value. erik: about half book. mr. staley: and it was not helped on friday or monday, and we need to correct that. to correct that, we announced last march a major strategic change in barclays. we have sold, or are in the process of selling all of our retail banking assets in continental europe. we have gotten out of the wealth management businesses in the united states and asia. we announced we will sell down
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to a noncontrolling, non-selling position in africa. we're the second largest bank in africa. we started that process a month ago. when it to close all these businesses -- we closed investment banks in nine emerging market countries. the core bank on barclays has a return on equity of double digits, this transatlantic bank i talked about. we need to close non-core, so what you see is the core bank that you see today -- that bank is generating profitability that should lead to significant appreciation of our stock price. what we need to do is not take our eye off that strategy. we cannot let the referendum vote change the strategy of barclays going forward, nor the execution of the strategy we started on march 1. erik: might you not have to be more aggressive about it -- more aggressive about cost cuts asset disposals, because you are going to be under pressure. if the u.k. economy and for that matter the european economy slow, it will affect your financial results, your ability
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to build capital, and your consumer bank to support the restructuring effort. mr. staley: he talked about the leadership issue -- i'm not sure we can push faster or harder. to sell a retail business in portugal, retail business in spain, italy -- we are the process of doing that in france -- to sell an index business to bloomberg, to close any investment bank -- and investment banking nine emerging-country countries -- emerging-market countries. we will close all of non-core, about 52 billion pounds of assets. we will get that down in 2017. you cannot move much faster than that. erik: your foot is already, like, on the floor. mr. staley: we don't sleep with our stock price at this level, and to get ourselves to a level
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that gives us the capital structure we need we must close non-core so that it shines a light on the financial value of our core business, which is this transatlantic bank. erik: if that is the case, you can't move faster on restructuring, asset disposal, job cuts etc., and at the same time your revenue is under pressure and your ability to generate capital is under pressure, and you need to be there for this government and the british people, might you be faced with the inevitability of having to raise capital? mr. staley: no. i think closing non-core freeze up capital. the amount of capital we free up by selling our stake in africa is quite significant. we have all the capital and all the liquidity that we need, and we will free up more capital as we get out of non-core and selloff africa. we do not need or capital. we are fine. we have the profitability in our core business to generate significant returns for our shareholders. you know, the challenge this
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whole referendum faces for us is we have settled on a consumer, corporate, and investment bank and what these measures will do in terms of the u.k. economy will impact our u.k. retail bank. the whole issue of how the european union will deal with the u.k. in terms of not putting up protections between the financial industries -- how do we react as a major bank in london to that? that is a new strategic challenge for us, but it will not deter the core approach we are taking, not deter the timing of getting the strategic shift in this bank done by sometime in 2017. erik: what if people, customers, consumer or corporate, or perhaps regulators, begin to lose confidence in your capital adequacy? mr. staley: you know, we obviously saw a significant move in our stock price. erik: there was a whiff of that on friday and monday for sure. mr. staley: if you look at our credit swaps, which is more a
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reflection of capital levels, we were fine. all of our funding was rolling can we were enormously liquid. all of our clients were comfortable facing off barclays as a counterparty. as i said, we were there for consumer clients and -- in the u.k. providing cash, credit, currency. we were actively engage with corporate lines. we closed three leveraged finance deals over this weekend. we were raging debt for major german corporations just this morning. so, we got no sense of concern about our capital, nor our liquidity, properly so, because there is no concern there. there is a concern about our earnings. that is being german about this concern for the u.k. economy going forward, and that is about the investment bank if there is a challenge to the european union and london as a financial center. erik: what have you leveled out
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-- the best case scenario, given the uncertainty, and perhaps the worst-case and arrow, what does this you look like, -- scenario what is this your look like, what does next year look like? mr. staley: one is the stress tests that governor carney talked about it we have gone through all sorts of stress testing that are much more draconian. we will be fine. in terms of earnings, we may have a contraction in our investment banking results in london but you have had a 10% correction in the currency and the majority of our investment banking revenues are in new york, and the last time i checked, we are using the u.s. dollar over there still. therefore, you will have a pop in terms of the sterling value were pound value of our revenues outside of the u.k.. the same thing with the credit card business. so, let's see what is going to happen in the u.k.. on the retail side, i think
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there will be some pressures but i am counsel with our ability to generate a strong return for our shareholders despite what may happen with the u.k. economy. erik: those same shareholders will want to know what happens with the dividend. given the scenario you face and what we are looking at in the years ahead, is it likely it will remain where it is lower, for a longer period of time? mr. staley: what we said march first, we cut out dividend down to basically half what we were paying and that was for the first half of 2017, and it gave us unfettered ability to close non-core. we have the e need, liquidity we need. cutting the dividend gave us the room and need to close non-core in almost any situation. in 2017, as we expect, if we moved to a core without the non-core aspect, and take the
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core results in the first quarter of this year -- a 10.5% return on tangible equity. take that number, and realize it, and take off non-core, and we have plenty of earnings. erik: what about the asset sales you talked about -- are any of them at risk --might any of them be repriced? mr. staley: that is a good question. the truth is there is no purchase sale agreement that we have that is contingent or dependent upon a brexit vote, so there is no cause. all the transactions we have negotiated will go forward irrespective of this referendum vote. erik: now, barclays africa -- you have a long-term intention to sell down that current controlling interest. might you reconsider that given that the pound has depreciated and the business in rand terms looks better than it did last week. mr. staley: it probably will help the proceeds we look at but no, the strategy to sell down in africa is the same.
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we sold a 12% stake about one month ago. it does go back to the math. under current regulations, we have to consolidate 100% of barclays africa liabilities, hold capital against it, hold that against it. if you are only holding 60% of the country's earnings will consolidate 100%, the method does not work. we love barclays africa. it is an outstanding bank. if you would like to own a share, you should buy it in johannesburg. erik: if article 50 is triggered, and negotiations with the eu began on a brexit, what issues are most critical for you that the government result to safeguard london as a financial center, and the country's bank including barclays? smr. staley: let me make a positive comment about the regulators -- the banking industry is safer today than it was six years ago. second, the level of dialogue
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with bankers and regulars is tremendously more supportive, collaborative, and frequent than it was before, but another very very important point is ever since the regulators got together on the back of the financial crisis one of the principal's has been as we all increase our regulations, and -- let's not let any country or region use new regulations to raise protectionist policy to exclude a non-domiciled financial institution. so, from the u.s. government to the u.k. government, to the european union no one has erupted regulations that make it harder for an american bank to compete in europe than a european bank, nor a european banks to compete in america against an american bank. that is a printable to have stuck to since the financial crisis, and as we negotiate this new arrangement between the united kingdom and the european union, we hope that principle of not directing -- you acting
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barriers continues. erik: what about euro claim. the prime minister of france, france followed, has said how much he would like to have euro clearing act on the continent. mr. staley: where certain activities might occur will be an issue for debate. erik: and an issue for you perhaps. mr. staley: today, for instance you have the outline, which is the agreement between regulators. so long as we have domestic regulation, which is roughly equivalent to another country's regulation, we will allow banks to transact across border between institutions. that is very important for barclays. erik: but that is the question -- how do you function as a global investment bank with hubs in london and new york if you cannot sell products and services on the continent, and for that matter, in island freely, as you can now? and if euro clearing moves from
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london to another center -- frankfurt, paris or wherever? mr. staley: first of all, under this article 50, there are two years from the date the article is triggered before anything changes. there is a long, long runway to see how the negotiations evolve from the day you trigger article 50. i would go back that i think the regulators have clearly stuck to this agreement of not creating protectionist barriers between finance institutions, and obviously there is going to be a long and difficult negotiation between the united kingdom and the european union, but i do not believe that getting to a point of harshness such that they go against this view that we need a global financial system using the capital markets across national borders to provide the oxygen to finance themselves.
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erik: you do not think there are parties that will weaken london's position as a finance of -- financial center -- that will try to use negotiations to that end? mr. staley: we recognize we need a system that can through capital markets fund growth everywhere. they are paying union might hope to use this as a way to accelerate their own financial processes -- very possible, but i think london is one of the global financial centers of the world where so much capital is located. you know, barclays, in our position in london, is the largest underwriter of eurozone sovereign debt. if you are a eurozone country and you want access to the global capital markets barclays is a bank you turn to. i do not think that is going to go away anytime soon. erik: the reason i ask is not because i want you to protect the future but just the stock market, the ceo's mind is a
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discounting mechanism, and unique and thick about scenarios and price it into your action. mr. staley: sure, and through my career in finance, living with glass-steagall, dodd frank, the victors rule, we are adjusting to regulatory reality. the united states government wants it to be run through an intermediary company with its own cap appear we have launch that july 1. we have run our capital in the united kingdom with the victors rule. that will take two build -- years to build. we are in the midst of doing that. banks are resilient, and i think we wir what happens. erik: what have your regulators been asking you since last friday? mr. staley: the first thing we have been talking about is how are the financial markets functioning -- liquidity, the credit markets. erik: that is what they wanted
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to know? mr. staley: we were counseling in communication in terms of this is what we were seen. it is wanting to have a market that is correcting down another thing to have a market that seizes up. unfortunately given this massive geopolitical move in the referendum the financial markets are open, liquid, and functioning since last friday morning. they wanted to understand that. they clearly wanted to understand what our position is. we were preparing for months to it were tremendously liquid. we were well-over-funded. we had the protection we needed. erik: we had a plan. mr. staley: we had a plan. as my old friend jamie says, you need a fortress balance sheet can we had a fortress balance sheet going into -- sheet. we had a fortress balance sheet going into thursday. erik: we have heard from governor carney at the bank of england will do what it takes to maintain stability.
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are you confident governor carney has the tools and skills to keep the financial system and the economy unstable footing? mr. staley: for sure. they have monetary policy that can be very accommodating. they have capital regulations with the british banks, barclays, that allows them to move capital such that we are more available to give credit with cyclical buffers and whatnot. there is the liquidity support that the governor spoke about. the bank of england has a lot of tools. i think they have the objective of doing the right thing to preserve the power and the growth of the u.k. economy, and they will do that, and do that in part by how they regulate the banks going forward. erik: nowerik:, what about the way you-- erik: now, what about the way
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you operate as an institution needs to change to accommodate the nimble-like state your company, the country will be in at least until september, and possibly for years to come? mr. staley: we're great people at barclays. it starts with conviction at the top here we have a great bank. it is terrific to be such a story institution in the united kingdom. we love being a british bank. we think it is a tremendous asset for us. we have a great management team. it is one that has worked together for a long time. i think we have shown an ability to be decisive, to act with conviction. we have a strategy that is going to work. so communal, these have been long nights dealing with -- so these have been long nights dealing with politics which is very tough at times. i feel good about barclays, the assets barclays has, the people barclays has. we had a huge townhall today and the questions are great kid
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will be fine. erik: you can hold the line. mr. staley: oh, yeah. erik: you not need to raise capital, your strategy is intact. keep your head down, eyes on the ball, and you will be all right. mr. staley: the goal here, on witness day, the banking crisis which led to an economic crisis that created a political crisis. today we have a political crisis that might lead to an economic challenge, but i hope that one of the stabilizing influences is a global banking system and the british banking system. matt: and that was barclays ceo jes staley speaking with erik schatzker. i think it is pretty amazing that amidst all of the market volatility we have seen in the la media alarmism we have seen surrounding this brexit, erik schatzker has managed to speak with three incredibly important figures in the world of finance in the last two days that have
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brought us such level-headed opinions. he spoke yesterday, scarlet and oliver, you recall, first with larry fink from blackrock. they manage $4 trillion, and he said he thinks it is debatable whether britain will actually end up exiting the european union, and then he spoke to david with stein of carlisle who said he does not think they will exit in the next two years, and finally, you get jes staley saying he does not think london will be diminished as a global financial hub. none of the incredibly overblown concerns we have been hearing. i have a picture of how much it costs to ensure barclays debt against default the last five years. you can see it has come down over the last couple of days as the equity prices recover, but it was not as high as they had gotten to back in february, and not nearly as high as you see deutsche bank and unicredit. it costs a lot more to ensure their debt than barclays. oliver: good --
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scarlet: good chart. speaking of deutsche bank -- deutsche bank shares are trading at a 30-year low. you had a double whammy from the federal reserve and the imf because last night the fed said deutsche bank's unit failed a stress test. today, the imf said deutsche bank might be the single biggest contributor to systemic risk among big banks. that is an incredible statement to make. oliver: it is, and it is another fail for deutsche bank. shares are getting hit big. the conversation about brexit has been this massive, political, sort of, a people, if you will, and whether -- upheaval if you will, and whether that will transition into the financial realm. the banks is one of the first places we see that. let's turn to high-yield markets now where risk assets are complacent ahead of the brexit vote in the next guest says the answer to the question is a resounding yes.
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trey parker. a lot going on. let's go to the chart you sent us looking at risk aversion in the high-unicredit market. it is pretty interesting. you can see right here where you look at the spreads, up pretty high, closest to the high since 2007, 2008 or so, and then a takedown following the vote. what does this tell you about the credit market, and do you see this changing over the next short-term, six months or so? trey parker: sure. since the financial crisis of 2008, the fed has push a lot of risk-taking into private markets, and what you see in high-yup markets today is a migration or behavior toward later-cycle behavior, so we are certainly watching the private markets and the capital markets more closely than the banking system as the banking system and balance sheets are definitely a fortress, as was said in the last segment. we certainly see some potential stresses and risk aversion in high-end credit markets. scarlet: how one-cited was the
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positioning leading to brexit and how does that position november elections in the u.s.? mr. parker: the decline -- a lot of investors were not position for that. a lot of active managers were chasing the market as they started to correct february through, say, may, and early-june. i think a lot of those investors are being patient, and not overreacting initially. i think the uncertainty and contingency will increase as this political vacuum continues over the next several weeks and months and there are increasing levels of uncertainty, not just about the political landscape, but the fundamentals, if you will, within the european union and the u.k.. scarlet: you have a political valley -- vacuum, creating opportunities in the markets creating opportunities. can you tell us where specifically? mr. parker: sure. guessing, since the fall last your, wider bid spreads and
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patient, longer-term investors can take advantage of that liquidity premium. users have been low on their balance sheets, not providing market equality as flows move in the opposite direction. that is the piece of the puzzle that is not materialized yet. we have seen outflows out of high-yield or leopard loans. if we were to see that, that is where dislocation or discounts get created, and therefore you can look at idiosyncratic opportunities for both of those markets. mr. parker: what you think about the supply and demand in high-yield debt? i have a function dis go, showing distressed debt and bond trading in the u.s.. this is a five-your look, but you can see we peaked at the beginning of 2016, and we have come back down to 2015 levels. how does the supply and demand look to you? mr. parker: the supply side of the market has reduced and that is created a technical rally,
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the one of the things that is a significant risk to the rally is where energy has trended especially in the u.s. corporate equity markets. inside of 800 basis points, i do not think the energy market is pricing in the level of default we're likely to see over the next one to two years. scarlet: we have a chart showing there is been a drop-off in domestic grade jet issuance. it is a steep drop-off from may. couple of reasons -- the apostate -- prospect of a u.s. rate hike got pushed out. there is no urgency for companies to borrow, and then you have uncertainty from the brexit vote playing out for the rest of the month. oliver: that is adjusting to there is a big search -- surgeon there, and you have this environment where rates were supposed to climb and now we have switched to the other, and now nothing from the fed and we see more easing in england as well. what exactly is that going to do
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to the issuing environment going forward? county potential issuers way the low rates versus the risks that are still to come? mr. parker: we have seen record issuance in ig's with the expedition of future fed rate hikes. i think issuers are sitting patiently going into the end of the second quarter waiting to see how volatility will play out in the markets, and if this behaved attitude across equity markets continues into july, i think you will see, once again, an uptick in ig issuance. we saw oracle do a big issuance this week. that is a testament to people taking advantage of the low-rate environment. scarlet: it was the third biggest deal of the year, and also breaking a dry spell in the wake of brexit. mr. parker: exactly. it has crowded investors and to the u.s. ig markets as people look for the places to find yield. matt: let me follow up on
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something i think i heard you say -- you don't think the energy markets are pricing in the level of default we are to see over the next couple of years? do you think we will be more defaults than the markets are pricing in? mr. parker: we do. at $45, $50 a barrel is where things stay. high-young users within the energy space are poised to see some level of restriction or default, and we do not believe that level is priced in particularly with the inherently low rates that high-yield issuers have seen thus far. scarlet: all right, trey parker think you so much for joining us. oliver: coming up next, rockets have called in the wake of the brexit vote. what is ahead question acquittal talk to simon smiles. you are watching bloomberg ♪. ♪
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scarlet: live from global head quarters new york, i am scarlet fu. oliver: i am oliver run it. matt: i am matt miller live in london. a gorgeous shot of new york there. scarlet: is it just as 19 london? matt: it is amazing. that could have something do with history because the weather here is obviously awful. scarlet: that is what i thought. oliver: what i would not mind getting a shot of is puerto rico, and that is my transition, looking at the s&p puerto rico bond index. it has been a rocky ride for municipal bond investors, but it is important to keep in mind. we are talking high-yielding puerto rico bonds that since 2013, really have gotten a lot of interest from riskier investors, investors like hedge funds, who have now battle to make sure they are able to keep payouts, and you can see this
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chart -- in june there was a steep drop-off as puerto rico governor padilla saying that the debt was going to be unpayable, and now we have news that congress passed legislation pushing back on the timeline so the government is able to go in, find some of those funds. it is expected obama is going to sign this legislation into law, and you see a rally right now. that will be a big deal as those investors have been fighting hard to make sure they do not get a major haircut. scarlet: it is just legislation. it does not change the financial prospects -- the brain drain continues. financials are not improved at all with this. oliver: that is exactly right, and it will be seen to see how hard investors continue to push as they want to get their payout. scarlet: there is always a catch. matt: on the plus side, we could probably buy cheap property there, which you cannot do here in london, no matter how much
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uncertainty we get. pick a look at guilds -- i am looking at a yield of 0.867%. so, you are getting paid less than 1% to lend your money to the united kingdom government for 10 years. people pile into guilds amidst periods of uncertainty, even when uncertainty concerns the u.k. even with that much uncertainty i could not find any apartments for less than 2 million pounds. scarlet: but the apartments are empty nonetheless. coming up, bill gates talks about worthwhile investing in the world of biotech. this is bloomberg. ♪
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matt: it is 1:00 p.m. in new york, 6:00 p.m. in london, and 11:00 p.m. in hong kong, i am matt miller. oliver: i am oliver renick live in new york. scarlet: i am scarlet fu.
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welcome to bloomberg markets. ♪ matt: in this hour, our coverage will take you from new york to toronto, to london and tokyo. here is what we are watching -- the race for the role of britain's prime minister takes an unexpected turn as prominent brazil supporter and former london mayor boris johnson says he will not run. scarlet: the pound dropping today as bank of england governor mark carney says they will have to loosen policy to deal with the fallout from the brexit vote. oliver: focus on farm a week on bloomberg -- you'll hear from bill gates on why he supports the u.s. drug pricing system. scarlet: we had to head to the markets were julie hyman has been tracking the movie and i could is, the more portly the move in currencies in europe. julie: yes, i news there is
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lucky to be more easing in europe. first we heard from mark carney from the bank of england saying given this u.k. vote that it is likelier than not, or at the very least, the bank of england stands ready to offer more stimulus. on his comments, we saw the pound take a leg lower. it had been little changed versus the u.s. dollar. down one quarter percent. then we learn the ecb might be willing to expand the confines and what it buys. we have been watching the euro in the wake of that -- the euro versus the u.s. dollar, also taking a leg lower at that point and then bouncing around, down about .5%. we have been looking at the ecb balance sheet as we have been tracking central bank balance sheets and their expansion over the past several years. here you have the ecb -- it looks like we are at record levels with this latest round of quantitative easing.
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i finally went to get back here to the u.s. and look at the 10-year note as well today. they're -- ashley not just the 10 year-note in the u.s. -- actually, not just the 10-year note in the u.s.. across the board, the exception is the german 10-year, which is unchanged, though the yield is still negative. the swiss 10-year going lower him a further into a negative yield. scarlet: you have bond -- oliver: you have bonds currencies -- what is going on with stocks? julie: cannot forget about stocks. any hint of further central stimulus here in the u.s., or this time in europe, we have seen people come into risk, come into stock. that is the playbook folks are following once again. volume in the s&p is about 11% above the 20-day average. take a look at the imap as well
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p not only have you had an extension of gains, you have had a broadening of gains. consumer staples are leading the gains. all the tenant is two groups in the s&p are higher. consumer staples a big part of the reason why that group is leading gains. it is because monda lee's has approached her she's -- hershey. 107 is the price being talked about. hershey trading above that level , inclined traders think a higher bid could be coming to scarlet: good stuff. thank you. oliver: let's go over to mark crumpton, who has more from the first word news desk. mark: oliver, mark carney says the bank of england will probably have to ease policy and future to carry the fallout from the brexit vote. he warned there is only so much he can do to protect the economy. governor carney: it now seems plausible that uncertainty could remain elevated for some time with a greater drag on private
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it -- productivity then we expected, and moreover we will like to be reinforced by financial conditions and likely spillover from the major trading partners. mark: carney says the bank of england won't hesitate to act when it comes to safeguarding the economy or the resilience of the financial system. hillary clinton has picked up an endorsement from your area france were all on -- europe. france while aland -- france while on is backing the democratic nominee. he says a trump election would hurt europe's ties with the u.s.. first lady michelle obama is calling on girls and young women in spain and other developed nations to help promote her global girls education initiative. during a conference in madrid mrs. obama discussed the troubled girls face trying to get an education in many countries. spain is the final stop on her three-nation tour to promote the lead girls learn initiative. -- let girls learn initiative.
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global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. this is bloomberg. back to matt miller in london. matt: breaking news -- the s&p is cutting its rating on the european union's super unnatural credit to a aa from a aa plus. i have the statement open right here. s&p analysts are saying we reassessed our opinion of cohesion within the eu, which we now consider to be a neutral rather than a positive rating factor. that said the outlook is favorable. s&p cutting its rating -- it's super unnatural eu rating from aa to aa plus. scarlet: it is reflecting that anchor ratings will remain at the current level. this is interesting, especially in light of the fact that you had two ratings companies
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downgraded their assessment of the u.k. following the brexit vote. oliver: exactly to the outlook is stable, but still a big cut. the u.k. getting cut and we had that from moody's. then we had this cut today. it brings up the point that listen, even though markets are signaling a recovery, there are so many questions lingering, and you to think about what kind of events could potentially be on the horizon that could make people revisit the seriousness and the nature of the situation. scarlet: things that will not be known for years -- all of these issues that have to be resolved. matt: i am just pulling up the euro. i love to watch the euro trade with gipt. i don't not know to use the function. it shows you the euro down about
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.6%. a little bit of a move down, but, of course, it has been lower earlier in the day, and there are signs that -- scarlet: i told up the scrolling chart on my bloomberg. it is great. it does not give you a sense of the move from earlier when you saw the leg lower in the euro, but you can see the movement along the way. oliver: adjusting. it is important to have your ratings, but also important to have a signaling method to the world to say this is our rating. the value added is supposed to avoid the volatility of the markets -- saying here is an outlook in the longer term. as you see the markets don't have these huge reactions. it did not happen when moody's cut the u.k. the other day. that is the case, once you start to see that in financial institutions. that is when you will have bigger problems, but as of now, just limited to those countries and the eu. we will keep moving on.
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during our investor george soros is still sounding the alarm over the consequences of the referendum. here's what he told the european parliament in brussels earlier. george soros: it unleashed a crisis in the financial markets comparable in severity only to 2007-2008. this has been unfolding in slow motion but brexit is accelerating it. matt: so, does last week's vote marked the beginning of a more volatile area in global markets. joining us from washington is simon smiles chief investment officer for ultrahigh wealth individual at ubs. simon, what do you think? is this the unbelievable crisis that george soros warned us about earlier? mr. smiles: i think i really hope george is wrong. our basic case is it is not.
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if brexit leads to the disintegration of the european union and the euro area, clearly that is a bad outlook for markets, however we do not think that is the situation we are currently in. the situation is clearly uncertain when it comes to britain, who is going to lead the country, when they are going to trigger article 50, what indeed will happen over the following two years, however we already seen some signs of stabilization across the remainder of europe. the results from the spanish election with a swing toward traditional parties rather than the eurosceptic parties being the first sign of that. matt: we do see -- we just saw standard & poor's cut its eu credit rating. we had seen earlier this week standard & poor's cut its u.k. credit rating. that has to be a concern. on the other hand, we have heard a lot of people -- some of your competitors, larry fink, yesterday, saying it is debatable whether the u.k. would leave the eu and we heard that
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from david rubenstein as well. jes staley told us london is still a banking stronghold. where do you feel that we are falling right now -- as far as kind of, levelheadedness, or total calamity? mr. smiles: first of all, the breaking news on the downgrade from aa plus two aa, i am not sure how much matters -- that matters. a huge proportion of fixed income offers negative yields. proportionately, if people working -- feeling negative, it would lead to a rally. that is the world we are in it with respect to what actually happens with great britain, the united kingdom, and whether they trigger article 50, there is a lot of conjunction there. they held a referendum. whether the referendum was wise to hold, whether everyone likes
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the outcome, they held it, and 1.3 million more britons, or people from the united kingdom voted to leave the european union. that is the evidence we have now. for politicians to not like the outcome to go back on that referendum, i struggle with how that actually plays out. interest in it, overnight the polls show that almost twice as many people polled actually would like to keep the referendum, what would rather not like to have a second referendum, and that is a much greater proportion of people not wanting a second referendum. scarlet: right, there is a lot of regret out there if you want to continue with these acronyms that people have been saying. in talking to your clients and high net-with individuals, obviously a lot are attracted by the united kingdom, have made investments there, have homes there. what is the level of concern amongst those clients -- matt mentioned levelheadedness. is there panic -- were they
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prepared for this scenario? mr. smiles: going into the referendum, i do not many people expected the results, and the markets reflect that many experts did not expect that either. we have a portion of our clients looking to hedge a potential leave by being long the in versus the pound -- the yen versus the pound. the vast majority of clients went into the u.k. referendum expecting a relatively benign outcome. for the clientele side, the united kingdom, the key exposure to the u.k. is property, and clients as deacon in particular it is london property. there are concerns for london property prices, but the only action is a rush to pay back pound-the -- pound-denominated liens.
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there are concerns about what a brexit would mean for the uk's position with respect to europe. there are concerns with respect to what a downturn in the economy such as that highlighted by carney would mean for london property prices. i don't see new money being deployed aggressively into london park and the -- property markets, but we see people using a much weaker pound to pay back pound-denominated liens. scarlet: what are the safe havens than for high net-work individuals -- is it the united states? mr. smiles: large clients tend to take a long-term view. they have built word harridan business they have grown to greater success, so they are used to thinking physically. that leaves them pre-disclosed -- so they are thinking strategically.
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that leaves them pre-disclosed to long-term trends and looking through the short-term noise like what we see currently out of britain. tactically, there is interest in trying to diss -- exploit dislocations. one area we have had a number of clients looking at is longer-dated european dividends futures, which are now pricing a far worse outcome with respect to dividends and earnings in europe that we saw the great financial crisis, and clients are looking to pick up european high-yield, which has sold off, is offering 5% returns despite europe being at the start of a credit cycle. the ecb policy has been very supportive after high-yielding credit and the dearth of yield within european assets broadly. oliver: simon, you mentioned looking at dividend futures is a place for dislocation, and that is interesting, because i have seen strategists talk about this as well -- where you find this
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locations, the when there are those anomalies that pop up in the markets, how do you make sure your clients to not end up in a space where liquidity is slim? those are articulate financial instrument. how do you balance that, looking for opportunity, staying liquid, and being able to move in and out? mr. smiles: that is one of the core advantages my clients have over institutional investors could they can deal with liquidity. they have high cash balances longer-term investment horizons as i mentioned, sore less liquid assets are a happy hunting ground, if you will, in the ultrahigh net worth space. the other characteristic of something like european dividends, which lends itself to our culture high net worth investors, they're not benchmark. it is off the mainstream. for many benchmarked equity investors, they cannot invest in that space. clients i speak to do not have that constraint.
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scarlet: simon smiles, chief investment officer for ultrahigh net worth individuals at ubs. think you so much. matt: coming up next, global currencies have taken a wild ride after the brexit vote. we will round up the fx news in the weekly roundup. this is bloomberg. ♪
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oliver: this is -- scarlet: this is bloomberg markets. i am scarlet fu. oliver: i am oliver renick. the pound has been rick saw sent the thursday resid vote, volatility has fallen
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uncertainty has not. i want to bring in vince cignarella, who covers kurds -- currencies for bloomberg news. your job as an interesting. currencies have been the focus. vince: absolutely. the more, the merrier. oliver: that makes sense. what are we looking at now -- we saw the big move in sterling, a rebound now, but what is the next chapter in the currency playbook? vince: really vast opinions, and they are really strong emotional opinions. the biggest lien is to the balance going lower. some going for parity. some think it is extreme. scarlet: over what period? vince: by year end, which is extreme, you would need to see volatility for that to happen but the emotion is strong. oliver: is there any talk about what sort of structural changes in the european economy will cause that? parity does not sell my something that will happen as a
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result of a rating downgrade or a news event. vince: the thought processes the european union will play hardball push hard against the u.k., punish them, if you will for leaving the european union, to keep the rest of the union hole. scarlet: you have a ratio of what the emerging market currency index over the u.s. ide index. that is a white line, right, the racial question mark vince: the ratio is the white line, -- ratio? vince: the ratio is the white line. as more people flow into em they flow into the developed currencies, so the shows a lack of fear, if you will, and vice versa. scarlet: and this leads other asset classes. vince: it has -- it has been a
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good indicator, if nothing else, a confirming indicator of what you might want to invest in. matt: vince, we just saw standard & poor's downgrade the supernatural credit rating of the european union. the euro itself -- the european monetary unit is down at 110 right now. do you think we can see that continue to slide, especially if we see more anti-european sentiment coming up in france italy? is that a possibility? vince: absolutely. i think the anti-euro sentiment has not begun to build yet. it is actually a safer bet at these levels to fall further on it percentage basis than the pound may fall in the near term. oliver: obviously, we had a big move around markets when china devalued their currency. what are people saying about what the pboc's next move could be in terms of their currency?
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vince: a good question -- a knockdown effect. if we see much slower global growth, it is only going to affect the growth in china, and if that growth slows substantially, whether we actually see it in numbers or not, most likely the yuan will have to devalue, not as much devalue as it will have to depreciate. scarlet: vince cignarella, our fx specialist, thank you for joining us. vince: thank you. scarlet: -- this is bloomberg. ♪
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oliver: this is bloomberg markets. i am oliver renick. scarlet: i am scarlet fu with our colleague matt miller in london. oliver: take a look at the stock
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market, staples, utilities, telecoms -- again, this is not shocking. it is incredible to see not only 10 sectors in the s&p up right now, but those three in particular. a lot of investors were starting to ask questions about how high these valuations could go, and whether or not those high valuations were going to affect their presence in low-volatility funds, and whether or not these were placed to go in terms of balancing markets, and this is been a trade that has continued to pay off. yesterday, she couldn't about how she liked these suckers, and here they are still green, and even though trading at 19, 20 times, investors still find value there. oliver: investors like -- scarlet: investors like commodities, the best quarter for the index since 2010. oil climbed as much as 26% in the second quarter before pairing that advance in the second week of june. it is holding at $49 a barrel. gold rally in as well, 17% in
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the first quarter, but then installed before getting a huge boost after brexit. matt: i want to look at well -- as well as what happened in debt markets. we saw the news, standard & poor's downgraded the eu. they downgraded the u.k. earlier in the week. we were talking about -- i think it is interesting. we saw it with the u.s. a downgrade often leads investors to pile into the debt. as soon as it gets downgraded they buy as much as they can and it pushes the yields down. still ahead on bloomberg markets, one billion or's push to spat -- spread modern medicine to those who need it. ♪ . .
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aí v matt: live from the city of london i'm matt miller. oliver: scarlet: i'm all of her run it. scarlet:and i'm scarlet fu.
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let's begin with first word news with mark crumpton in the newsroom. mark: turkey has made more than a dozen arrests in connection with the attacks in his temple. the turkish government blames islamic state for the bombings which killed 42 people and wounded 200 others. the eiffel tower will be eliminated in the color of the turkish flag. the image of the turkish flag has been projected onto several world sites, including berlin pasta brandenburg date and amsterdam's royal palace. house speaker paul ryan says house members will act on a terrorism package that includes a provision to prevent suspected terrorists from buying guns. this follows the sudan from democrats to force a vote on gun control measures. a new poll shows the percentage of american households owning guns is there a 40 year low. 46% of adults either own a
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firearm or live with someone who does, the lowest rate of gun ownership in the history dating back to 1978. a quinnipiac survey finds 54% of registered voters support stricter gun laws. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. this is bloomberg. matt: thank you very much. this month, bloomberg continues its focus on the world of pharmaceuticals by gathering prominent leaders to discuss the industry. erik schatzker sat down with billionaire il gate whose foundation seeks to spread modern medicine to those in need . he talks about why he supports the drug pricing system and the medical advances he finds most promising.
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mr. gates: vaccines have still been the tool that has saved the most lives. even today, inventing vaccines were hiv, malaria, tb, a number of these diseases that are still out literally killing millions of people, that is a top priority for us because it is a magical intervention. erik: other areas like gene therapy or gene editing, how much promise do you think they have to the -- i hate to say it that way -- easier work done in vaccine development? mr. gates: gene editing is such a basic tool and it's going to pervade all the work in the biological sciences. those tools even for diagnosis to understand disease models you really cannot understate
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what a great set of tools they are. in a direct sense, we see them in our plant and animal work because it will speed up better plants and help on animal disease. the regulatory pathways are complex. for mosquitoes, this is a superior system to effect either mosquito populations that are carrying the virus, and for something like hiv-aids, it is possible, though there are a lot of hurdles, that you could do gene editing to cure somebody from the disease. that would be fantastic since we don't have a cure, we just have lifelong treatment. i see it in so many of the different foundation programs. erik: many of the most advanced therapies are expensive to develop and the companies behind them are incentivized to
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generate the maximum profit possible. i'm thinking of things like valiant, but the price of hepatitis c treatments, immuno there up the, blood disease drugs -- what in your mind is the best way to control costs so these medicines and treatments are not just available to the rich and well insured? mr. gates: i think the current system, despite some extreme cases that have in properly labeled as an appropriate, think the current system is better than most other systems one can imagine. during hepatitis c is a phenomenal thing and now you have multiple drug companies competing in terms of the quality and the price that it is offering. the drug companies are turning out miracles and we need their research and development budgets to stay strong. they need to see the
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opportunity. for things like alzheimer's, they can reduce medical costs so dramatically and improve the human condition. the arms cynical companies have been great partners of our foundation when we need help in doing science. they are unique in what they can do and they are good about tiered pricing. if you take hepatitis c as an example all of the responsible companies do this they had an approach through poor countries that was not oriented toward them making money, just driving access. tiered pricing is often the way you can square the idea that access and being able to fund new miracles, you really want both. matt: that was really a man who needs no introduction, bill gates speaking with erik schatzker. for full coverage, visit form
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ago on the bloomberg terminal or on the web. scarlet: let's go to abigail doolittle at the nasdaq where she's looking a couple of movers, starting with biotech. abigail: it has been a remarkable week for the nasdaq and particularly for i/o tech. we are looking at the best three-day rally, up modestly today, but over the last three days up six and half percent. it's hard to believe we are in the worst i/o tech market since 2000. yesterday's top performer is today's top performer in the biotech space will stop the company doubled yesterday into a mid-cap company on the news they will be filing an nda for and know very and cancer drug. many analysts have raised their price targets and very bullish sentiment around here. one of the top performers on the quarter and that's pretty
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remarkable for a company that had been a small cap biotech company. scarlet: biotech is waiting for the nasdaq today but what about today? abigail: the biggest used includes intel and apple. city raised its price target i 13% to $35 a share. investors may be encouraged by the rationale, citing better pc demand in the recent apple iphone. he did raise his recent estimates but intel has lowered its forecast two times this year, so it will be interesting to see what happens when they report in july. oliver: coming up, our mystery stock of the day. a bad note from an analyst
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suggested good shorts are indeed just that will stop -- just that. ♪
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oliver: this is bloomberg markets. scarlet: let's head over to the markets desk where julie hyman has a big reveal on the mystery talk. today's pick is feeling groovy as it had higher. an analyst suggested good shorts are just that. oliver: i was laughing because i have the opposite of a guest. i have nothing for inventories i'm thinking oil. julie: i have to give my props
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to my producer. he's not talking about shorts you where on the outside of your close. he's talking about boxer shorts hanes brands is the company we are talking about. hanes brand. so in a recent note in the interest rate observer, he question the business model of signet jewelers and today is talking about hanes brands and is raising a number of different questions about the business. it is down again in today's session and he says the company has grown in part by mergers and acquisitions, but he is questioning the costs and charges associated with those acquisitions. at the same time, net income is going up. he's questioning the transparency and whether their
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growth is what it seems. we have it down by nearly 4% in what is nearly otherwise and up market. my favorite quote says maybe underpants makers instinctively recoil from transparency. take a look at the bloomberg. this chart has to do with inventory growth versus sales growth. here's the sales growth year over year and it went negative. here's the inventory growth, so there has been a buildup in inventory at the same time sales have been waning. and a quick check on apparel makers more broadly and how they have been doing with the rest of the market. still down 3%, so we have not seen as much of a recovery.
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apparel and retail are usually battered here. oliver: julie hyman, a very fun hand but not so much of a fun story about stocks. scarlet is looking at conagra earnings. scarlet: earnings in a bigger picture because conagra touched a five month low. the ceo is overhauling the food producer and for the most part investors seem to like the results. let's go through the numbers. even with today's did scherzer of conagra have outperform the s&p 500. this is since he was named ceo last april. one measure of profitability needs some work. while it is improving, conagra trails it appears. the move to shed the private label unit and then ill-fated
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merger should bolster those margins. but at just the beginning. conagra's management says they are opened to management. these brands could all be on the chopping block. they are also bringing down cost and moving down. his goal is to reduce annual cost by $300 million. because of these initiatives, conagra has improved its margins over the last few years. once they slimmed down, they may be in the position to look for acquisitions again. it could provide more that capacity for purchases and private label rand's sails would create a $1.6 billion tax asset that could he used to shield gains from acquisitions. matt: turning now to canada
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part of the commonwealth whose economy gained for the first time in three months in april with housing helping to offset losses in the oil patch. we are joined by our bloomberg tv canada anchor and my sister while i report from london. pamela: good to talk to you. let's take you through the numbers. .1% growth, pretty all tree, but growth nonetheless. we have seen two previous months of decline and the housing sector becoming quite reliant on the fact that we see growth in toronto and vancouver's real estate market. we see growth on the real estate and home improvement side of things as people feel like they have money in their pocket so we are seeing growth on that
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some growth in manufacturing and accommodation and food services, just enough to offset the plunges that we see from mining, oil and gas. we see economists across the board saying that it is surprising resilience. matt: i'm sure the alberto wildfires must have factored into these april numbers. pamela: a are factoring into the end of april. it is made people are concerned about. we've seen a huge plunge in oil and production in april was a huge decline in may will be worse. we saw one million barrels of production a day taken off-line and that will play into the main numbers. scarlet: i have to bring into of my favorite topics, hockey and charts. it's the chart of the hour on bloomberg. as you know, no canadian team
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made the nhl playoffs this year. that shows up in the gdp data doesn't it? pamela: it does. this is interesting. the arts entertainment and recreation category of gdp slid 3.9%. the chief economist out of bank of montreal says of we had seen a couple of teams in canada make it to the playoffs, then our overall gdp might have been more like .2%. hugely important, the spectator sports side of things. lots of money spent on hot dogs and beer. matt: i know you know a lot about hockey and scarlet plays a lot of ice hockey. as an outside of -- outside observer, the winning teams i always see are in los angeles and new york -- i never hear of
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canadian teams entered good at ice hockey. are there any in the pros? pamela: it's because all of the canadian players play on u.s. teams and i may patient fan and i know nothing, so over to scarlet. scarlet: say that again? matt: as i'm based in new york, i see the rangers when they are in the playoffs and winning. i think about the kings as a great hockey team. are there good canadian hockey teams? scarlet: not recently but there are a lot of great hockey players. oliver: you are treading on thin ice. matt: both of us reporting from the crown. pamela ritchie our anchor in toronto. scarlet: we have some news from
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defense secretary ash carter. the u.s. military announcing transgender service members will be able to serve openly in the military. the defense secretaries eking live in washington. this is bloomberg. ♪
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scarlet: this is bloomberg markets. there is something happening in the u.s. labor market. you have working age men actually leaving the labor force. an analyst from goldman sachs gave us some theories as to why. guest: the economy wide purchase a patient been declining for a long time. i think that's pretty well understood that a lot of it affects aging workers moving toward retirement age at the big question is why our prime age workers not leaving?
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this is a cohort of people most intensely focused on the labor market, actively searching for work and have been dropping out of the labor force in greater numbers. that became even more tense -- intense around the time of the recession. we think we can find two main groups of people who have dropped out of the labor force. the first is relatively young workers who have returned to school or stayed in school longer than they would have. a lot of people think you have increasing returns to school in the labor market and there's a larger premium for staying in school. that's a benign explanation. there's a less benign explanation for some of it as well. a lot of those who have dropped out of the labor force are in the middle il category, people with a high school diploma but no college degree. those types of workers have been hit hard in structural decline
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and that is a big part of the labor force participation rate coming down. joe: if more women are working, the woman is making money for the family and the man doesn't have to. that's not really borne out by the data, is it? guest: early in the 20th century, that was a story and probably counted for some of the decline in prime age male leaving the workforce. women in the workforce has been flat for the last number of years but it doesn't seem to be a major driver. when we look at the types of people dropping out of the labor force, they tend to not have a working spouse and 10 to come from low income households. it doesn't seem like they are dropping out of the labor market has it seem like they have other options.
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scarlet: i wonder to what extent that is applicable to the united kingdom? when we talk about the losers and globalization, it is not limited to the united states. joe: it's a fascinating thing because it is much worse that it is in other industrialized countries, which is why it is sort of a had scratcher. you can cite these things -- globalization and skills by technological change, but it is not as bad as it is in the u k and germany. oliver: let's talk about geopolitical risk. you have economic uncertainty policy uncertainty -- this joe: he called this a new era of risk.
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it was seen as a dovish speech and the pound fell, but this captured it -- there's a new era, not a post 2008 era. it's a new era where no one knows what the economic makeup of the u.k. is going to be once it also down. scarlet: and it might be the first shot across the bow because there are elections coming up. conor sands has written about how 2016 could the where you have a lot of big political events driving -- joe: we are seeing a lot of things we would not have expected to see -- the fact that trump has made it this far, that the u.k. did vote to leave the eu shock a lot of people, so nobody knows where we are going. oliver: we still got some stuff
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from the u.s., what is the skiff? joe: personal spending is solid. we got the chicago pmi, there some week data like always but nothing that would suggest recession. oliver: and you guys have more coming up with "what'd you miss?" matt: i will be joining them later today. we're going to ask the economics professor at the university of arming him to weigh in on the comments. this is bloomberg. ♪ . . .
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>> 2:00 in new york, 7:00 in london, and 2:00 a.m. in hong kong. >> this is "bloomberg markets." ♪ >> from bloomberg 's world
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headquarters in new york i am david gura. vonnie: i am vonnie quinn. we will take you from san francisco to mexico city to london. david: we see broad-based gains at the end of the quarter. vonnie: moments away from the rate decision in mexico, the most divided in years on whether we will see a rate hike. david: is the brags it -- brexit the end of britain 's revival? let's go to the markets desk with breaking news on the central bank decision. ramy: 4.25% is the rate coming out. the survey from bloomberg had a median of 4%, so we see a 0.25%

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